INBS 12 month fixed

G

gammarid

Guest
I have split up my cash amongst intuitions and I am not particularly nervous about the state guarantee etc. however I am curious to know what my options are with regard to breaking the terms of a fixed term saving account with INBS (should things deteriorate even further)

The T&C say:

Withdrawals or closures prior to the account maturity date may result in a penalty equal to the cost to the Society of replacing the amount withdrawn. This penalty will be calculated using the following formula: A x B % x C

A - is the amount withdrawn.
B % - is the difference between the prevailing market rate of interest for the term
remaining and the rate on the account.
C - is the number of days remaining in the term.

A and C are easy! Not to sure how to work out B!!
 
gammarid said:
B % - is the difference between the prevailing market rate of interest for the term
remaining and the rate on the account.
Click to expand...

Well if you are 6 months into the 12, and 6 month rates are (say) 5% and the 12 month rate was (say) 5.5%, then B= 0.5%

So if you deposited €10,000 and withdrew it all after 6 months, my calc of the penalty would be

€10,000 x 0.5% x 183/365 = €25 (which seems low....maybe somebody else is wiser?)

Assumptions
They use the 365 day convention-just taking 183 days on its own would result in what looks like a crazy penalty!

'Prevailing market rate' is defined, I would ask what the reference rate is for this rate.
 
Yes I agree that would be particularly draconian penalty!

Could B be the difference between the rate of the account type if it were taken out today and the rate at the time it was taken out (i.e. with today’s falling rates, it would be a negative and therefore no penalty)

Or could it be based on the interbank or market rate – i.e. that is the rate they would need to borrow themselves to reimburse you (assuming they had already tied the money up). In this event what is the interbank or market rate???


 
gammarid said:

Could B be the difference between the rate of the account type if it were taken out today and the rate at the time it was taken out (i.e. with today’s falling rates, it would be a negative and therefore no penalty)

Or could it be based on the interbank or market rate – i.e. that is the rate they would need to borrow themselves to reimburse you (assuming they had already tied the money up). In this event what is the interbank or market rate???
Click to expand...

I would guess it is more likely the second-but that is purely a guess. They really should state how the reference rate is calculate somewhere in the literature....
 
Spoke to one of the INBS people today (who was very helpful) and yes the factor B is based on the differnce between the rate of the account and the rate at which the bank would need to borrow (which is hard to quantify).

The advice is to talk to them and they deal with it on a case by case basis and may be able to work out another option.
 
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